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Why Twitter Might Sell Vine Instead of Shutting It Down

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Vine app.Jens Büttner — picture-alliance/dpa/AP

Several weeks ago, Twitter announced that it was closing down Vine, its short-video sharing app. The news was widely mourned by fans of the service, but it appears that those eulogies may have been premature. According to one report, Twitter is in talks with a number of potential buyers.

Tech news site TechCrunch says the company is “currently vetting multiple term sheets from companies offering to buy Vine, and hopes to make a deal soon,” according to anonymous sources.

Twitter initially had as many as 10 expressions of interest, but has narrowed those down to five, TechCrunch reported. A number of these potential bidders are located in Asia, and one of the most well-known is said to be Line, the Japanese mobile messaging company whose app is similar to WhatsApp.

Vine was acquired by Twitter (TWTR) in 2012 for an estimated $30 million, just months before the startup’s founders were planning to release the app publicly. For a time, Vine was one of the stars of the short-form video market.

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Over time, however, Vine was overtaken by competing services, including Snapchat and Instagram’s (FB) short video feature. Some believe that Twitter also failed to take advantage of its lead and didn’t do enough to keep the emerging stars who used Vine happy, and so they moved to YouTube (GOOGL) and Snapchat.

When the company announced that Vine was being shut down, many of its early users paid tribute to it for enabling artists of all kinds to share their work. And many users pulled together lists of their favorite clips.

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That kind of renewed interest may have convinced certain companies that the service might be worth acquiring—something Twitter likely hoped would happen once word got out that it was shutting down.

As is often the case, even expressions of interest from potential bidders could turn into nothing. Twitter itself was also reported to be in discussions with a number of companies about a potential acquisition recently, including Disney (DIS) and (CRM), but they all backed out.

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And even if a sale does go through, it is unlikely to result in any kind of windfall for Twitter. According to TechCrunch, the figure being discussed with some bidders is in the $10 million range. That’s about what some observers estimate Vine was going through every month in operating costs.

It’s possible that Twitter could continue to gain some revenue from Vine through its ownership of Niche, a social marketing service that it acquired last year for a reported $30 million. But that would likely generate only a small amount of recurring revenue, if it happened at all.

Twitter has been under pressure from investors because the company’s user base is not growing, and it lost more than $500 million last year, primarily because it has very high levels of stock-based compensation.